State of working Ohio, 2018: Inequality amid job growth

State of working Ohio, 2018: Inequality amid job growth

Ohio is now in the ninth year of a national economic expansion. At the federal level, $2.3 trillion tax cuts should have the economy broiling. But from our lack of wage growth, you wouldn’t know it. What gives?

The economy IS good, as measured by job growth and official unemployment. The national recovery has been slow and modest, but it has lasted for a very long time. Ohio’s recovery hasn’t been as strong or gone on as long as the nation’s, but even so, nine years is an awfully long time to be expanding. So why don’t people’s piggy banks feel heavier?

One big reason is that the federal tax cuts, despite ballooning the federal deficit, were not designed to create jobs or boost job quality, and, at the state and federal level, policymakers simultaneously did much to undermine typical families.

Federal and state policy have, aside from expanding health care, reduced many protections for working people. Congress let the minimum wage lose ground. The Trump administration revoked overtime rule updates which would have let more workers get paid overtime when they worked more than 40 hours a week. The Supreme Court ruled to forbid unions from collecting fees that enable them to function, while still requiring unions to represent workers who refuse to contribute to union costs. And both President Trump and Congress spent much of the last two years trying unsuccessfully to get rid of the Affordable Care Act which has helped nearly a million Ohioans get health insurance.

In Ohio, there have been some helpful policy developments, but retrenchment in other ways. The Affordable Care Act and Governor John Kasich’s acceptance of Medicaid expansion meant strong increases in insurance coverage that continue to benefit Ohioans. Our minimum wage is a bit above the nation’s. And when Ohio lawmakers made public sector collective bargaining illegal in 2011, Ohioans used the people’s veto to restore that right. Yet over the last decade lawmakers have also blocked unionization efforts for childcare and home care workers, disinvested from work supports and local government, made it harder to afford higher education, and failed to address declining job quality.

In the past when unemployment was this low, working people saw more raises—in the late 1990s the share of national income going to paychecks was a full three percentage points higher than it is today, according to economist Jared Bernstein.[1] Low unemployment is great news—for someone once jobless who now has a job, life is surely better. But persistent low wages, particularly in Ohio, signal a squandered recovery.

A good economy should work for all of us. A business cycle that lasts this long in an upswing is a rare gift. It is a deep shame to squander the peak of a recovery with policies that are so determined to send so much of America’s wealth to the wealthiest.

This 2018 edition of the State of Working Ohio uses the best and most recent data available to try to understand what is happening to workers in Ohio. In this time when working people have become much more educated and productive, this report sheds light on how the economy is working for workers. We conclude with recommendations to enable more broadly shared prosperity. We can afford these changes and we know what they are. Will this be the year we find the will to bring them about?

Finding: In the middle of the 20th century, from the post-World War II period in 1948 through the mid-1970s, worker compensation grew right alongside productivity, with average hourly compensation (wages and benefits) of production and non-supervisory workers nearly doubling (91.3 percent growth) and net hourly productivity doing the same (96.7 percent growth). Since that time, productivity nearly doubled again, while compensation edged upward only slightly. If you examine the whole period, 1948-2016, you see productivity levels nationally that have spiked by 250 percent while compensation grew over that entire 68-year period by only 115 percent, nearly all of that in the previously-referenced mid-20th century.

Finding: From 1979 to 2016, productivity grew by 72.4 percent nationally and by 66.5 percent in Ohio, cumulatively. Compensation rose by only 14.1 percent nationally and edged up by a meager 3.8 percent in Ohio after accounting for inflation. Workers are much more productive, companies are much more profitable, but inflation-adjusted pay is essentially stagnant.

Finding: Income inequality has risen in Ohio since the 1970s, as it has in every other state. The current level of income inequality stands in contrast to the mid-20th century’s more shared prosperity. Between 1945 and 1973, the wealthiest 1 percent of Ohio households captured about 4 percent of total income growth. Compare that to the explosion in top-tier wealth between 1973 and 2015: During that period, Ohio’s wealthiest seized a whopping 86 percent of all pre-tax income growth (excludes Social Security and other transfers).

Finding: Ohio’s wealthiest 1 percent of households took home 15.8 percent of all earned income in the state in 2015. That is more than twice the share captured by the top percentile in 1974, and within five percentage points of the share they were taking just before the onset of the Great Depression.

Finding: The median wage is the wage earned by the worker at the midpoint - half of workers earn more and half earn less than this. Inflation-adjusted median wages rose very slowly between 2016 and 2017 in Ohio and nationally, despite low unemployment. In Ohio, the 2017 median wage was just $17.79 an hour, up just four cents an hour from the previous year when adjusted for inflation. This was nearly 50 cents less than the national median wage of $18.28 an hour, and more than 40 cents less than Ohio’s median wage was in 1979 when we begin this series. Growth was faster in other years of this decade: When adjusted for inflation, median wages grew by more than 3 percent between 2015 and 2016 and between 2014 and 2015. Last year, by contrast, median wage growth was just 0.2 percent. Despite the two decent years leading up to 2015 and 2016, wage growth in Ohio has generally been weak with the exception of a strong run in the late 1990s, and plunges during downturns have been steep, leading to Ohio’s current median wage being stuck below recent peaks and below its level in 1979. Nationally, wages actually fell in the most recent quarter.

Finding: Many of Ohio’s jobs offer very low median wages. Of the 10 most common occupations in the state, three pay less than the official three-person poverty line and nine pay less than twice the poverty line for that size family, even with full-time year-round work. In hourly wages, just two pay more than $15 an hour at the median. This in a nutshell explains the challenge in the Ohio economy: The most common jobs are generally not family-sustaining.

Finding: Even among the bottom 90 percent, wage growth is not equally distributed. Since 1979, workers toward the top of the income spectrum have captured most of the wage growth in Ohio. Ninetieth percentile workers—those earning more than 90 percent of other employees, earn about $6.91 more each hour than they did in 1979, while workers at the median and below all earn less when adjusted for inflation.

Finding: Women continue to earn less than men in Ohio, although in 2017 women’s median wages rose slightly (from $15.85 to $16.15) while men’s slid a bit (from $19.38 to $19.29). Still, men earn more than $3.00 more each hour than women do, translating to more than a $6,500 difference with full-time year-round work. This disparity has improved dramatically over the nearly 40 years of this analysis, due both to rising women’s wages and shrinking men’s wages at the median, when adjusted for inflation.

Finding: Black workers’ wages lag far behind those of white workers at the median in Ohio and the gap has grown much worse over time. Black workers earned just $13.96 at the median in Ohio in 2017, compared to $18.57 for white workers, a gap of more than $4.60 each hour, translating into more than $9,500 less each year with full-time year-round work. Black workers’ median wage actually fell slightly between 2016 and 2017 in Ohio, despite the good economy. This may be partly the result of pulling the most disadvantaged workers into jobs—when previously excluded workers are finally permitted into the labor force they tend to start at low wages, pulling down medians. Because the sample of black workers is smaller than that of white workers in Ohio, the data jumps around a bit more, but the trend is clear. White workers earn much more at the median and the story has gotten worse, not better.

Finding: For the entire period between 1979 and 2012, Ohio labor force participation was higher than it is today, though there’s been a slight uptick over the past few years, to 63.0 percent in 2017, up from a modern low of 62.3 percent in 2015. The share of Ohioans that is employed (the employment-to-population ratio) remains below the level at any point between 1987 and 2008, and well below its recent peak of 64.6 percent in 2001. It too improved modestly between 2013 and 2017. Despite low unemployment rates, both measures of how well Ohio’s labor market is pulling everyone in are worse than they’ve been in all but a handful of the years since our dataset tracks this, starting in 1979. Unemployment is very low, a good thing. But, it is masking the fact that too many Ohioans are still not working.

Finding: Men, prime-age workers, Asian-American and Hispanic workers, and those with a BA or more are all more likely to be employed than other demographic groups. Less than one in three of those with less than a high school degree was working in Ohio in 2017.

Finding: The reasons that Ohio workers are not all back in the labor force are complex. But chief among them is that Ohio still had fewer jobs by July 2018 than it had prior to the 2000 recession, in January 2000. This is in contrast to the United States, which has added 13.83 percent to its job base since that time.

Finding: Some analysts argue that the reason for lower employment as a share of population in Ohio is our aging state. In fact, even when you control for age, employment levels remain below their peak for prime-age (25-54 years) Ohio workers—albeit far better than in some recent years. During the peak year of employment, 1999, 82 percent of prime-age Ohioans were employed. In 2017, just 78.6 percent of prime-age Ohioans were working.

Finding: Women’s labor force participation climbed steadily throughout the 1980s and ‘90s before hitting a peak of 62.4 percent in 2008. After that the rate fell sharply and has stayed low, at just 57.7 percent by the end of 2017, up slightly over that calendar year from 57.2 percent. Male labor force participation, in contrast, fell in most years of our analysis and was 68.6 percent by the end of 2017, up slightly over the previous year, but down more than 10 percentage points from its peak of 79.6 percent in 1979.

Finding: Ohio has been slowly adding jobs since February 2010 at a modest growth rate. By July 2018 there were 5.616 million jobs in Ohio, higher than at the start of either of the last two recessions (March 2001 and December 2007). This is an important accomplishment. Job levels remain lower than at their peak in May 2000. Economies should be adding jobs throughout expansions and should much more quickly replace jobs lost in previous recessions, but the long, slow, steady growth has finally brought us to nearly positive territory.

Finding: Since 2000, nearly all of the jobs created in Ohio’s economy are in health services, professional and business services, and leisure and hospitality. Manufacturing, the sector called “trade, transportation and utilities,” information, construction and mining have all lost substantial numbers of jobs since 2000—manufacturing in particular is still down more than 328,000 jobs. This calendar year has been a good one for manufacturing but it still lags far behind where it was in 2000 (which already followed decades of decline).

Despite the big loss in manufacturing and the sector that includes trade, transportation and utilities, these jobs remain important in our economy, making up 12 percent and 19 percent, respectively, of Ohio jobs. Education and health services (17 percent), business and professional services (13 percent), leisure and hospitality (10 percent) and government (14 percent) are other large employment sectors.

Finding: The official unemployment rate was extremely low in Ohio (5.0 percent) and the U.S. (4.4 percent) in 2017. The Ohio rate was 4.9 percent in July. This is excellent. Some caveats: unemployment this low should push wages upward—that is not yet happening in Ohio or in the country. Unemployment is much higher in certain communities, including for African Americans and in many rural counties. Finally, low official unemployment doesn’t capture those who have left the labor market—labor force participation remains depressed in Ohio.

Finding: The good news about statewide overall unemployment obscures the fact that unemployment rates in the black community (9.4 percent) in Ohio were more than double those facing white workers (4.2 percent) in 2017. The 9.4 percent level would be considered recession territory if it was faced by all workers. African-American workers are more likely to lose work during downturns. When the labor market gets very tight, employers are forced to turn to workers that they might otherwise pass over because of bias, including black workers. While unemployment levels remain inequitable, unemployment for black Ohioans was lower in 2017 than at any time since 2001, clearly a positive development.

Finding: Official unemployment was quite low in Ohio for both men (5.3 percent) and women (4.7 percent) in 2017—not quite as low as in the late 1990s but lower than at almost any other time in the past 39 years.

Finding: Higher education completion secures higher wages in Ohio, and this is truer than it used to be. Workers with a BA earned $26.30 an hour in 2017, more than 10 dollars more each hour than any other educational category. This equates to more than $21,000 more each year with full-time work. Since 1979, median wages have declined in inflation-adjusted terms for workers of all education levels except for the minority of workers with college degrees or more. Inflation-adjusted median wages fell from $15.64 in 1979 to just $10.35 an hour in 2017 for those who haven’t finished high school, from $16.00 to $15.02 for those with just a high school diploma, and from $16.75 to $15.93 for those with some college (either an associate’s degree or an incomplete BA). For those with at least a college degree, median hourly inflation-adjusted wages rose from $21.38 to $26.30 over that period.

Finding: Ohioans are substantially more educated than they used to be. The share of adults over age 25 without a high school degree in 2017 was less than half (10.5 percent) what it was in 1979 (24.4 percent). The share with at least a high school degree correspondingly shot up from just 75.7 percent in 1979 to 89.5 percent by last year. And, despite the enormous and growing cost of higher education, the share with a BA or more has jumped 12 percentage points, from 14.7 percent in 1979 to 26.7 percent in 2017. Still, Ohio is lagging other states. We ranked 25th among states in high school graduation attainment, 37th among states in BA attainment and 30th among states in post-graduate education in 2011-15 American Community Survey 5-year estimates.

Finding: While increased education raises wages for black, white, male and female workers, black workers and women still face inequitable wages compared to white workers and men, even when they have the same education levels. For example, white workers with just a high school degree earned more than black workers with some college, and men with just a high school degree earned substantially more than women with some college. White workers with Bachelor’s degrees earned more than $4 more each hour than black workers with a BA and men with a BA earned more than $4 more each hour than women with a BA at the median in 2017. These differences equate to more than $9,000 a year with full-time, year-round work.

Finding: Union workers continued to out-earn non-union workers at the median in 2017. The median union worker earned $21.76 an hour that year, compared to $16.98 an hour for non-union workers, a difference of more than $4.75 an hour or more than 28 percent. With full-time, year-round work, this equates to more than $9,900 a year. Unionized workers are also more likely to get retirement benefits, health benefits, and overtime pay.

Finding: White, black, male and female workers all earn substantially more when they are in a union in comparison to non-unionized workers of the same race or gender. However, white workers and men in unions earn more than unionized black or female workers. White and male workers may be in different unionized occupations than black and female workers—for example, white men are far more likely to be in the highly-paid building trades unions, while black workers and women are more likely to be in service sector or public sector union jobs. Black workers are more likely to be unionized in Ohio at 13 percent in 2016, compared to 10.5 percent for white workers, according to the CPS.

Finding: In the wake of the Affordable Care Act, Governor Kasich opted to expand Medicaid in Ohio, paid for largely by the federal government. This led to a substantial increase in health insurance coverage for Ohioans. While 12.3 percent of Ohioans were uninsured in 2010, prior to enforcement of the ACA, by 2016 just 5.6 percent of Ohioans lacked insurance. This represents tremendous progress, but it is threatened by attempts to repeal or erect barriers to receiving Medicaid in Ohio.

To summarize: What we find, in 2018, is that unemployment is finally low in year nine of a long, slow recovery in Ohio. We’ve also finally gotten within throwing distance of restoring the jobs we had prior to the 2000 recession (we’ve surpassed the jobs at the start of the official recession in March 2001 but not the all-time peak jobs, in May 2000). But labor force participation is still suppressed. Further, despite what should be a roaring economy, wages are simply not doing more than creeping up—in fact wage growth was almost non-existent in 2017, after better growth in 2015 and 2016, and there is reason to think it may have slowed further in 2018—it has nationally. Inequality is growing and the very wealthiest are capturing almost all growth in the economy, nationally and in Ohio. Though workers are more productive and more educated than in the past, they are not sharing in Ohio’s growth or in the nation’s. And while education and unions both help, Ohio is not doing enough to support either of those important institutions.

We once took on some of our biggest economic and social challenges with some gusto. In the early 20th century, to make a largely agrarian population with low rates of formal education ready for the challenges of the industrial age, America created universal public education and eventually seeded the planet’s best system of higher education. To get products to market and dominate the globe’s production of manufactured goods, Americans invested in an interstate highway and rail system that was unparalleled. To deal with poverty in the wake of the Great Depression, we established social security, set a minimum wage, and encouraged unionization. And to address entrenched racism and racial inequities, Americans sparked a Civil Rights movement that demanded inclusion and challenged white supremacy.

Today, some of our biggest problems are an overheating planet, entrenched racial inequity, worsening economic inequality, and a labor market that, even when good, leaves many out. The high share of our population that is addicted to opioids and other drugs also needs targeted attention. But instead of addressing these head-on, as we might have in other times, policymakers are avoiding or even worsening these problems. Our 26 findings deserve assertive fixes. Below we offer 10, many of which we earlier highlighted in A new way forward: Ten ways to support Ohio’s working people.

Reverse the policies at the state and federal level that are directing tax cuts to the wealthiest Ohioans and Americans. These are not creating sufficient numbers of good jobs to pull all Ohioans into the labor market. Instead, we should restore taxes on the wealthiest, who have benefited most from our economy, and direct spending toward drug treatment, worker retraining, early education, infrastructure repairs and energy investment. The first three will help people leap the barriers that keep them out of the workforce and the last two will create good jobs in manufacturing and construction while also solving societal problems.

Invest in conservation, renewable energy and transit to create high quality jobs in communities throughout our state. Building and installing wind turbines and solar panels; building, installing and driving transit vehicles; and insulating and retrofitting buildings are all activities that could employ manufacturing, construction and other workers, particularly in Ohio. They are worthy of investment in Ohio, including maintaining and strengthening our recently resumed advanced energy standard.

Protectworking people’s right to organize. Oppose so called “right to work” laws both nationally and here in Ohio and move to actually encourage, not discourage unionization. This will require innovative new approaches to organizing, to counteract the barriers that the Supreme Court and policy makers have erected, which will reduce unionization.

Keep the Affordable Care Act and Medicaid expansion that have done so much to insure Ohioans. Resist attempts to impose barriers like additional paperwork or work requirements

Restore the minimum wage. Increasing the minimum wage to $15 by 2025 would give 1.8 million Ohio workers a much deserved and overdue raise. Accompany a stronger minimum wage with stronger labor law enforcement. Not paying workers the minimum wage, not paying for all hours worked and not paying overtime when required are all against the law. This makes them theft – wage theft.

Retain and strengthen unemployment and workers’ compensation. Unemployment compensation and workers’ comp are essential parts of a fair labor market. When workers lose a job they need help through the transition. When they’re hurt on the job, they need help until they recover. Resist attacks on these two pillars of American labor law, and ensure that employers pay their fair share to support the unemployment compensation system that helps our economy.

Restore the 40-hour work week: Improvements to scheduling and overtime rules can bring back stability to the work week and ensure that salaried workers earning under $48,000 are paid for all the hours they work. Restored overtime protections would cover 351,000 Ohio workers.

Expand earned leave, so workers who’ve put in time can get through the birth of a child, the death of a parent, or their own illness with the balance that they need to be good family members and good employees. Twenty-five years after the Family Medical Leave Act only 13 percent of private sector workers have any paid family leave. There is no federal law requiring paid sick leave. Ohio law could provide workers with the opportunity to earn leave.

Stop incarcerating people for non-violent crimes. Instead offer treatment for drug use, help probationers avoid reincarceration, and create better incentives for incarcerated adults to behave and take part in rehabilitation, so they can rejoin their families and the economy. Every Ohioan has a chance to vote for these changes when Issue 1 appears on the ballot in November.

Empower local governments to pass their own laws to protect working people in their communities. The state has preempted that right, undermining local attempts to control fracking, protect civil rights, or expand worker rights. If the state won’t protect us, our communities must be allowed to do so.